Data Neutral
The indexes closed mixed Monday with the MID and DJT closing lower as the rest posted gains. Internals were positive on the NYSE and NASDAQ as NASDAQ volumes rose from the prior session while the NYSE’s declined. No technical events of import were generated on the charts as high “volume at price” (VAP) levels remain near term barriers to progress. The data is largely neutral. As such, we have yet to see enough of a shift on the charts and data to alter our near term “neutral/positive” outlook for the major equity indexes.
On the charts, the indexes closed mixed yesterday with all advancing except the DJT (page 4) and MID (page 4) closing lower.
- No technical events of import were generated on the charts.
- Yet we would note the high VAP levels discussed over the past few notes remained a barrier to progress as the last six consecutive sessions have seen challenges to overhanging resistance that have been repulsed. If this morning’s futures are an indication and should the indexes manage to hold onto their implications at the close today, said VAP levels would finally be overcome, adding a more positive tone to the outlook. We will have to wait for the close for that determination.
- Looking at trends, the SPX (page 2) and DJI (Page 2) are in short term uptrends with the rest neutral.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive.
The data is mostly neutral.
- The 1-day McClellan OB/OS Oscillators remain neutral (All Exchange:+26..97 NYSE:+30.43 NASDAQ:+23.82).
- The Open Insider Buy/Sell Ratio (66.1) and the % of SPX stocks above their 50 DMAs (53.3) are neutral as well.
- Psychology remains generally positive with the new AAII Bear/Bull Ratio (contrary indicator) bearish sentiment persists at 38.67/24.0. We view this lack of enthusiasm on the part of the crowd as a positive.
- The detrended Rydex Ratio (contrary indicator) at –0.57 is neutral.
- The 12-month forward consensus earnings estimate from Bloomberg for the SPX has dipped to $170.52, leaving the forward p/e at a 17.0 multiple while the “rule of twenty” finds fair value at 17.9 suggesting the SPX is slightly undervalued. This is based on the assumption that said estimates will hold. The shift in valuation has largely been due to the notable drop in the 10-Year Treasury yield to 2.09%. The earnings yield stands at 5.9%.
In conclusion, while the VAP levels may be surpassed today, we have yet to see a sufficient shift in the weight of the evidence to alter our near term “neutral/positive” outlook for the major equity indexes.